Bank of Montreal – Tax Court of Canada awards pre-settlement offer legal costs at more than the party and party rate in order to encourage timely settlement offers

The Crown agreed that BMO was entitled to substantial indemnity costs of $450,069 for the legal costs incurred by BMO after it had made a settlement offer (over seven months before the Tax Court hearing), but argued that BMO was entitled to receive costs only at the meagre Tariff rate for its legals incurred before then. This was based on Rule 147(3.1), which provided that a party receiving substantial indemnity costs following a settlement offer is entitled to party and party costs to the date of service of the settlement offer.

Graham J instead awarded pre-offer costs of 35% of BMO’s actual such costs of $684,471. He considered that being more generous in this regard accorded with the policy of encouraging settlement offers to be made at least 90 days before the hearing even in circumstances where substantial legal costs had already been incurred. Otherwise:

A party who made an offer within the [90 day] time limits would be rewarded for making the offer but, at the same time, punished for not having made it sooner.

Neal Armstrong. Summary of Bank of Montreal v. The Queen, 2021 TCC 3 under Tax Court of Canada Rules (General Procedure), s. 147(3.1).